Renault opens China factory amid slowing market

Ghosn says China is a core part of Renault's strategic plan. He is pictured, right, with Dongfeng Chairman Zhu Yanfeng, at the opening of the automaker's joint venture plant in Wuhan.

WUHAN, China -- Renault today launched its new 870 million euro ($942 million) factory here, saying it still sees plenty of growth in the Chinese market where new-car demand is slowing after years of double-digit growth.

The plant will start production of the Kadjar compact SUV soon, followed by a larger SUV later this year and the Fluence electric sedan in 2017.

Renault will build 150,000 units a year at the factory in central China.

Capacity could eventually double or triple, Jacques Daniel, head of Renault's joint venture with local partner Dongfeng, told reporters.

Renault is playing catch-up in China after leaving the market to its alliance partner Nissan until now.

"Are we arriving after the battle? Not at all, because this market is not going to stop," Daniel told reporters. "Entering a market of 20 million vehicles a year is no bad thing for a manufacturer."

China opportunity

Renault-Nissan CEO Carlos Ghosn said China is a core part of Renault’s strategic plan but added: "Renault does not depend on China, China is only an opportunity for us."

Renault sold just 23,000 vehicles in China last year. The automaker's catch-up strategy is to bet on the SUV segment, which it said accounts for one-third of the Chinese market and is still growing at a rate approaching 50 percent.

Renault has been a marginal player in China without local production. The automaker has relied instead on less profitable imports such as the South Korean-built Koleos SUV. The Wuhan factory will build the Koleos successor.

The company's arrival as a manufacturer coincides with a weakening of the Chinese economy and car demand. After an abrupt slowdown in mid-2015 and partial recovery later in the year, the market is likely to grow 4 percent to 6 percent in 2016, much lower than the double-digit expansions of preceding years.

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Renault

Kadjar production at Renault's new Wuhan plant.

The Wuhan plant will assemble only a few thousand Fluence EVs from kits supplied from Korea. While Renault has a license to produce light commercial vehicles in China, the focus currently is on SUVs, Ghosn said.

EV sales in China will remain low for higher cost cars such as the Fluence Ghosn told reporters. Renault and Nissan are working on a more affordable electric vehicle for the Chinese and global markets, he said.

Local engine

Renault will start sales of the Kadjar in China next month. The company said the SUV has been fitted with some different equipment for Chinese customers compared to the Kadjar released in Europe last year, including a panoramic sunroof, four-wheel steering and an independent rear suspension for added comfort.

The Kadjar will be offered in China with a 2.0-liter gasoline engine built at the Wuhan factory. Later this year, a turbocharged 1.2-liter gasoline engine imported from Europe will also be offered.

Renault's Daniel said the automaker is increasing its China sales network to 150 dealerships from 125 last year and would add more with any future plant expansions.